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Euro break-up is biggest threat to businesses in 2012

The finance chiefs of the UK’s largest businesses see a break-up of the euro as posing the biggest single risk to their companies in 2012, according to the latest Deloitte CFO Survey. UK corporates are unconvinced by the response of European politicians and policymakers to the crisis. On average, Chief Financial Officers (CFOs) see a 37% probability that one or more member states will leave the single currency in the course of 2012.

CFOs believe that a collapse of the euro would have a severe effect on UK businesses, causing a new credit crunch and driving major swings in asset prices and exchange rates.

Ian Stewart, Deloitte chief economist, said: “Against such a backdrop it is no surprise that a return to recession in the UK is, after the euro, the second biggest concern for CFOs in 2012. CFOs are now working on the assumption that Britain will fall back into recession. They see a 54% chance of the UK suffering a ‘double dip’, up from just 27% a year ago. The majority of respondents (64%) expect a prolonged period of weakness lasting more than a year. Moreover, financial stress is already affecting big UK corporates, with CFOs reporting the sharpest decline in credit availability since the third quarter of 2008.”

Uncertainty is seen as another significant risk for business in 2012. The proportion of finance chiefs rating the level of external financial and macroeconomic uncertainty facing their business as being “high” or “very high” has more than doubled in the last six months to 56%, up from 26% in the summer. One CFO summed up the mood, ‘Everyone is waiting for something very bad to happen’.